Lower US supply to underpin oil price despite talks failure

Omani oil and gas minister, Mohammed Al Rumhy, said Monday his country could help to narrow the difference between rivals Saudi Arabia and Iran, which scuttled plans for a crude output freeze Sunday, in Doha, Kallanish Energy learns.

Saudi Arabia, in a game of chicken, said they wouldn’t freeze any of their production unless Iran did that same.

The policy, Kachikwu said, was created to remedy lingering decline in the price of crude oil in the worldwide market. The ETF seeks daily investment results that correspond to two times (200%) the inverse of the daily performance of the NYMEX light sweet crude oil futures contract for the next delivery month.

“Taken together, these factors have reduced the effect of overstocking, which was experienced by the market in early January (2 million barrels daily were surpluses)”.

“Oil markets are very volatile”.

OPEC and nonmember oil-producing nations could revive talks to cap crude output this summer, Ibrahim Muhanna, a top adviser in the Saudi oil ministry, told the Wall Street Journal.

To some extent, oil prices were “saved” by a massive oil worker’s strike now going on in Kuwait which effectively shut off half the country’s oil production on Sunday, as MarketWatch reported.

“The much-awaited meeting exposed the political rift between Saudi Arabia and Iran, and (this) ultimately doomed the agreement”, said Barclays oil analyst Miswin Mahesh in a research note.

Lower potential USA supply is one of the reasons why oil prices have rallied more than 60 percent since their early year lows – alongside expectations of some sort of deal emerging at the meeting in Doha. “Saudi Arabia also has been producing at maximum output, although the Saudis claim that they have additional possibilities – but no one can confirm or deny it”.

“I don’t think that this (OPEC, non-OPEC meeting) will solve things”, Hochstein said.

The rebalancing process on the oil market is well underway, especially in North America, where the US and Canadian high cost producers are forced to cut production, Ole Hansen believes.

The price of oil fell as much as seven per cent after the talks ended but then bounced back.

But remember, for a long-term rise in oil prices, all we needed from Doha was recognition among oil traders that a price floor was forming.

Saudi Arabia is the global leader in oil exports. Estimated to be just over 95 million barrels a day right now, it’s expected to grow to more than 96 million barrels a day during the summer driving seasons, as North Americans hit the road in all the SUVs they have bought in the past year.

Hochstein said that Iran had skilled engineers and technical abilities honed during sanction years but that a return to the market would not be easy.

“The lack of a decision at Doha is more than offset by, at least for now, the loss of output from a major Arab Gulf oil exporter – Kuwait“, said Daniel Yergin, vice-chairman of IHS, by email.